On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?

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